As the Kindle 3 and its eInk Pearl screen march onwards B&N and Sony aren’t sitting still.

B&N has released the Nook Color and yesterday released the Nook 1.5 software upgrade. Sony has cut the prices on its ‘we compete on quality, not price’ Sony Readers and is adding apps to iPhone and Android in December.

Sort of. Here are the updates in the Nook 1.5 software upgrade with my comments in italics –

Automatically sync last page read across Nooks and Nook Apps. Kindle has had this for a long time.

Create and organize ‘shelves’. Matches the Kindle’s Folders feature.

Password protect your Nook and password protect purchases. The former matches a Kindle 3 feature which is also present in Kindle 2.5. The latter isn’t available for any Kindle and is a great feature.

Faster page turns. It’s about time – will have to check if page turns are as fast as on Kindle 2.5.

Search books and documents easily. Again, it’s about time.

So 5 out of the 6 additions (counting the two different password protection features as separate additions) translate into Nook adding features already present in Kindle 2.5 and Kindle 3 and closing the gap a bit. The 6th feature (password protecting purchases) is a very good feature and something Kindle needs desperately.

Nook 1.5 update doesn’t make Nook better than Kindle 3 or even Kindle 2 – However, it closes the gap a bit.

Nook adds syncing for last page read but WhisperNet syncs highlights and notes.

Nook does close the gap with its password protect feature for purchases. Amazon’s probably just happy to not impede the purchase process in any way.

The net result of B&N’s big, huge 1.5 upgrade is that it’s managed to reduce the gap between Nook 1 and Kindle marginally.

People are still going to pick B&N’s Nook for ePub support, library book support, in-store browsing at B&N stores, and for the mini-screen at the bottom. People are still going to pick the Kindle for text to speech, Kindle Store book prices, free Internet, great customer service, and the other Kindle advantages. Kindle 3 has the eInk Pearl screen and is much faster and much lighter and has better battery life and is going to get picked a lot more often than Nook 1 or Kindle 2.

$100 Nook 1 trumped by $89 Kindle 2

Not much to say here. Amazon always does this – spoils B&N’s November and December parties.

Nook Color – Odious Comparisons and B&N’s surprise star Tablet

Nook Color is an entirely different and surprising beast – B&N has either managed to combine the worst of the eReader and Tablet worlds or it has managed to craft something that straddles these worlds perfectly.

The Nook Color reviews so far are split – The more tech-savvy the person the more they feel Nook Color won’t work out. Which matches almost exactly the reaction to the first Kindle – book purists and tech experts hated it. It should give B&N hope that Nook Color has polarized opinions so strongly – Apple people and the tech intelligentsia are attacking it only because they feel threatened.

Kindle and Nook Color aren’t really competing except for a tiny intersection/overlap between regular readers and casual readers. In the narrow intersection of those two groups is a thin slice of readers who can’t decide whether an Android Tablet with a LCD screen is better for them or a dedicated eReader with an eInk Pearl screen.

Nook Color vs (Kindle Reading Apps + iPad/iPhone/Android smartphones)

The real competition is between Nook Color and the device that casual readers currently read on. To be more precise Nook Color is primarily competing with the iPhone+Kindle for iPhone combination and the Android Smartphone+ Kindle for Android combination.

Kindle’s advantage is that it is leading on nearly every platform. Nook Color’s advantage is that every casual reader who picks Nook Color gets locked into the Nook ecosystem.

It’s the strangest sort of war because it’s hard to pin down exactly who/which device is competing with what/which device.

Sony Reader tries to remind people it’s still around

Sony is making three moves of its own – Sony Reader Daily Edition ships November 26th, there are price cuts on Sony Reader 350 and 650, and Sony Reader apps for iPhone and Android launch in December.

Sony Reader Daily Edition – Did anyone know it was coming out?

There was a comment asking about it. That’s the only mention of the Daily Edition in the last 3-4 weeks.

Did you know it was available for preorder? That there’s a $50 price-cut and it’s $250 now?

Neither did I.

Sony hasn’t been paying attention to the US. It doesn’t take much effort to get the blogs and newspaper sites to write about an eReader – If eReaders that aren’t even in production can get buzz why not an eReader that is 3 days away from launch?

It’s disappointing because instead of forcing Amazon and B&N to innovate faster Sony is doing next to nothing.

Sony sticks to quality over price – Well, Actually

After a long speech on how its going to focus on quality over price Sony has cut the prices of the Sony Reader 650 and 350 by $30 each.

Why didn’t Sony release at these price points?

90% of people considering an eReader would have considered the touch-capable, eInk Pearl screen enriched, rather good-looking 350 and 650 if they had been $150 and $200 at launch.

1 year and 9 months after Kindle for iPhone we get Sony Reader for iPhone

Kindle for iPhone was launched in March 2009 which itself was a bit late to tap into the iPhone casual reader market. Sony is going to launch Sony Reader apps for iPhone and Android in December 2010.

Think about it – We have the eReader Wars going on and Sony took 1 year and 9 months to tap into what is arguably the most important channel to reach casual readers.

It’s down to Kindle vs Nook

Sony can pretend it’s focusing on Europe or Atlantis or whatever market it likes – It’s doing nothing of consequence.

If you’re in love with the Sony Reader – it’s a good choice. It’s a beautiful eReader.

The only problem is that it’s made by a company that doesn’t seem to want to sell books or help people get books. Sony wants to get $150 for the Sony Reader 350 and then wash its hands off – No infrastructure like WhisperNet, no in-store features like B&N, and no reading apps for other platforms. On top of that Sony Reader Store’s book prices are terrible when compared to Kindle Store and Nook Store.

For all practical purposes Kindle vs Nook vs Sony Reader is down to Kindle vs Nook.

The twist is that by introducing Nook Color and not updating Nook 1 B&N has thrust Kindle vs Nook into some sort of strange space-time-eReader continuum where it’s unlikely you’ll ever be seriously considering more than one of Kindle and Nook Color and where the Nook 1 is trapped in the ‘previous generation eReader’ black hole.

Amazon needs a Color Kindle or a Kindle Tablet to compete with Nook Color and B&N needs to compete with the Kindle 3 by releasing a Nook 2 with an eInk Pearl screen.